The pilot facility by Swedish company Northvolt, whose CEO Peter Carlsson used to work for Tesla (>> Tesla), is the most advanced European initiative to break dependence on imports.

The high costs of batteries means electric cars are still only a niche product, but regulatory action to reduce emissions combined with incentives to make electric cars more affordable has spurred significant investment.

EIB Vice President Andrew McDowell said the bank would partner with Brussels to help to develop Europe's battery capacity. Last week, the EIB's board approved financing for the Swedish plant, McDowell said in Brussels, saying the details of the deal were still being finalised.

"The EIB's board of directors last Tuesday approved 52.5 million in financing alongside the Swedish government for the Northvolt battery production project," he said.

Europe's battery cell demand is projected to reach 200 gigawatt hours by 2025 - a market worth an estimated 250 billion euros annually, European Commission Vice President Maros Sefcovic said on Monday.

He and others welcomed the Northvolt initiative at the second meeting of an EU initiative to promote cooperation in a race to develop domestic capacity - dubbed the "European Battery Alliance".

"As central as the combustion engine for e-mobility are cells and batteries; we would be blind, even naive if we would think we can handle the cell and battery technology as a commodity," the deputy economy minister of automotive powerhouse Germany, Matthias Machnig, said.

"It is urgent, we have to take decisions," he said.

Battery packs currently amount to between 30 percent and 50 percent of the cost of an electric vehicle, but battery costs are falling amid increasing competition in the sector.

The market is dominated by Japanese firms Panasonic (>> Panasonic Corporation) and NEC, Korea's LG and Samsung (>> Samsung Electronics Co Ltd) and China’s BYD and CATL, as well as Tesla.

(Reporting by Alissa de Carbonnel in Brussels; Additional reporting by Gilles Guillaume in Paris and Edward Taylor in Frankfurt; Editing by Adrian Croft and Jane Merriman)